# Question: An investor plans to put 50 000 in one of four

An investor plans to put $50,000 in one of four investments. The return on each investment depends on whether next year's economy is strong or weak. The following table summarizes the possible payoffs, in dollars, for the four investments.

Let V, W, X, and Y denote the payoffs for the certificate of deposit, office complex, land speculation, and technical school, respectively. Then V, W, X, and Y are random variables. Assume that next year's economy has a 40% chance of being strong and a 60% chance of being weak.

a. Find the probability distribution of each random variable V, W, X, and Y.

b. Determine the expected value of each random variable.

c. Which investment has the best expected payoff? the worst?

d. Which investment would you select? Explain.

Let V, W, X, and Y denote the payoffs for the certificate of deposit, office complex, land speculation, and technical school, respectively. Then V, W, X, and Y are random variables. Assume that next year's economy has a 40% chance of being strong and a 60% chance of being weak.

a. Find the probability distribution of each random variable V, W, X, and Y.

b. Determine the expected value of each random variable.

c. Which investment has the best expected payoff? the worst?

d. Which investment would you select? Explain.

**View Solution:**## Answer to relevant Questions

An insurance company wants to design a homeowner's policy for mid-priced homes. From data compiled by the company, it is known that the annual claim amount, X, in thousands of dollars, per homeowner is a random variable with ...Benny's Barber Shop in Cleveland has five chairs for waiting customers. The number of customers waiting is a random variable Y with the following probability distribution. a. Compute and interpret the mean of the random ...n = 5, p = 0.6, P(X = 3) a. The binomial probability formula, Formula 5.4 Round your probability answers to three decimal places. b. Table VII in Appendix A. Compare your answer here to that in part (a). J. Fetto, in the article "Love Stinks" (American Demographics, Vol. 25, No. 1, pp. 10-11), reports that Americans split with their significant other for many reasons-including indiscretion, infidelity, and simply "growing ...From past experience, the owner of a restaurant knows that, on average, 4% of the parties that make reservations never show. How many reservations can the owner accept and still be at least 80% sure that all parties that ...Post your question